That was the scene of a historic public political showdown between the late President George H.W. Bush and Israel: With a possible peace deal between Israel and the Palestinians in the air, the 41st U.S. president refused to approve $10 billion in loan guarantees to help Israel cope with a wave of immigration from the former Soviet Union, and subsequently demanded that Israel freeze its settlement building before agreeing to the request.

The angry confrontation, and months-long standoff that followed, would affect the course of both Bush and then-Israeli Prime Minister Yitzhak Shamir’s political careers. It would also permanently change the dynamics of the three-way relationship between the United States, Israel and American supporters of the Jewish state.

It also marked the first time that an American president had ever dared to tie military or economic aid to Israel with limiting settlement construction in the West Bank, Gaza or the Golan Heights.

Thomas Dine, the then-executive director of the American Israel Public Affairs Committee, declared that September 12 – when Bush announced he would tell Congress that the request for the guarantees must be deferred for 120 days – would be "a day that lives in infamy for the American pro-Israeli community."

Dine lamented that "this president did what no other president has done: He held a special press conference on this issue and challenged not just congressional efforts to proceed with the guarantees legislation, but Israel's overall aid levels."

The pro-Israel lobby was shocked by the determination of the Bush administration to postpone congressional consideration of the guarantees – which it had carefully crafted with the Israeli government and expected to sail through Congress and then the White House in early October.

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An AIPAC official assured me at the time that, with strong bipartisan support, the guarantees would pass the approval process “like a knife through butter.”

But then, on Dine’s “infamous” September 12, Bush took to the White House podium, where he made his case against passage of the guarantees. He argued that they would disrupt the “historic breakthrough” peace process his administration was attempting to move forward.

In the aftermath of the American success in the first Gulf War, the White House had sought to use its sudden political capital in the Arab world to organize the Madrid Conference for the fall of 1991. The event would, for the first time, have Israel negotiating directly and publicly with the Palestinians and neighboring Arab states.

Bush told reporters that deferring the guarantees was vital “in the interest of peace,” because bringing it to Congress would “raise a contentious debate” that he feared would “interfere with our ability” to bring the parties to the peace table.

“A 120-day delay is not too much for an American president to ask for with so much in the balance,” Bush said. “We must give peace a chance. We must give peace every chance.”

In making his case, Bush pointedly reminded Israel that “just months ago, American men and women in uniform risked their lives to defend Israelis in the face of Iraqi Scud missiles,” and that the Gulf War had “achieved the defeat of Israel’s most dangerous adversary,” referring to Saddam Hussein’s regime.

Moreover, he said, his administration had approved $4 billion in military aid for Israel, representing “nearly $1,000 for every man, woman and child,” and had already given Israel “millions in loan guarantees.”

The U.S. president said he would view lobbying efforts by AIPAC in Congress against him as “an attempt by Congress to prevent the president from taking steps vital to the nation’s security. Too much is at stake for domestic politics to take precedent over peace.”

Bush’s not-so-subtle subtext was that by demanding the $10 billion, the Israeli government (and AIPAC) was behaving ungratefully and interfering in the power dynamics of the American government, and the ability of the president to call the shots when it comes to foreign policy.

Bush’s best-remembered remarks referred to a National Leadership Action Day lobbying effort taking place on Capitol Hill, organized by the Conference of Presidents of Major American Jewish Organizations and AIPAC.

Bush told reporters: “I heard today there was something like 1,000 lobbyists on the Hill working on the other side of the question. We've got one lonely little guy down here doing it." He drew a raucous round of laughter from the assembled journalists at this description of himself.

Bush’s public appeal for support worked. Polls at the time found that 86 percent of Americans agreed with the president’s call for the loan-guarantees delay. And major U.S. media backed his stance, with both the New York Times and Washington Post running editorials favoring his position.

For Jerusalem, the second part of the one-two punch came a week later, when then-Secretary of State James Baker flew to the Middle East and delivered even tougher news to Shamir and his government: The loan guarantees would not receive White House support without a settlement freeze.

The reasoning was clear: Without such a freeze, there was no way to ensure that U.S. help would not, in some way, end up populating West Bank settlements with the new immigrants.

On Baker’s journey home from Israel, a “senior administration official” – which most assumed to be Baker himself – briefed reporters that the Americans had been “damn forthcoming” to Israel, but would not give it “an unconstitutional $10 billion infusion that does not have any restriction.”

AIPAC blinked first, backing down from its demand that the loan guarantees be pushed through Congress. That marked a turning point in the history of the lobby’s relationship with both the White House and Israel.

Shamir, by all accounts, was furious that his supporters in Washington had backed down from the fight, after assuring him the loan guarantees were a done deal. Still, he had no choice but to accept it, just as he was unable to resist American pressure that dragged him reluctantly to attend the opening ceremony at the Madrid Peace Conference, on October 30, 1991.

Beginning of the end

The confrontation between Bush and Shamir didn’t help either leader’s political career. While only a conspiracy theorist would pin the fact that Bush was a one-term president on his damaged relationship with American Jews, the bad blood certainly did not help his reelection effort the following year. Jewish voters favored his challenger, Bill Clinton, to an even greater extent than they normally supported Democratic candidates: Only 11 percent of American Jews voted for Bush in November 1992.

Shamir’s hold on the Israeli political leadership also ended soon afterward, as he lost the premiership to Yitzhak Rabin in June 1992. His downfall was at least partially attributable to the Israeli public’s discomfort with his inability to maintain a harmonious relationship with the country’s most powerful ally.

Shortly after the Israeli election, Rabin resolved the drawn-out impasse over the loan guarantees by striking a deal with Bush, promising to limit settlement construction (without freezing it entirely).

Sitting down with the organization’s leaders, Rabin reportedly criticized the pro-Israel lobby for what he viewed as its role in pulling Shamir into such a bitter confrontation with a U.S. president, vowing it would not happen on his watch. Frankel wrote: “From now on, [Rabin] told them, Israel would drive its own relations with Washington, and AIPAC would be consigned to a back seat.”

Haaretz.com, the online edition of Haaretz Newspaper in Israel, and analysis from Israel and the Middle East. Haaretz.com provides extensive and in-depth coverage of Israel, the Jewish World and the Middle East, including defense, diplomacy, the Arab-Israeli conflict, the peace process, Israeli politics, Jerusalem affairs, international relations, Iran, Iraq, Syria, Lebanon, the Palestinian Authority, the West Bank and the Gaza Strip, the Israeli business world and Jewish life in Israel and the Diaspora.